Institutional Investors’ Ownership Stability and Their Investee Firms’ Equity Mispricing

Sakaki, Hamid, Jory, Surendranath and Jackson, Dave (2021) Institutional Investors’ Ownership Stability and Their Investee Firms’ Equity Mispricing. The North American Journal of Economics and Finance, 57, [101440]. (doi:10.1016/j.najef.2021.101440).

Record type: Article

Abstract

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm's market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee (1998, 2001) since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.

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March_2021_INSTITUTIONAL INVESTORS AND EQUITY MISPRICING - Accepted Manuscript

Available under License Creative Commons Attribution Non-commercial No Derivatives.

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